Gold futures drop as U.S. dollar, equities climb Gold futures traded sharply lower on Thursday as a stronger US. dollar and a climb in equities lured investors away from the precious metal. News of a contraction in Chinese factory output in January contributed to gold’s losses. Gold for April delivery GCJ4 -1.50% , which is the most-active contract, fell $19.70, or 1.6%, to $1,242.50 an ounce on the New York Mercantile Exchange, giving back the 0.9% gain it scored a day earlier. March silver SIH4 -1.80% lost 36 cents, or 1.9%, to $19.19 an ounce. After the Comex session ended on Wednesday, the Federal Reserve said it’s cutting its stimulus program on Feb. 1 by another $10 billion a month to $65 billion. “Initially, precious metals showed a somewhat positive reaction to the news with gold rallying to a high of $1,270 overnight,” said Fawad Razaqzada, technical analyst at FOREX, “but it has dropped quite sharply from there.” “As well as concerns over the impact of the normalisation of U.S. monetary policy, the dollar has meanwhile rallied while HSBC’s confirmation that the Chinese factory output probably contracted in January also weighed on the metals,” he said in a daily email. China is one of the world’s biggest gold buyers. The HSBC China Manufacturing Purchasing Managers’ Index fell to a final reading of 49.5 in January from 50.5 in December, HSBC Holdings PLC said on Thursday. A reading below 50 indicates a contraction from the previous month. Meanwhile, the U.S. economy expanded rapidly in the final three months of 2013, with gross domestic product growing at a 3.2% annual pace in the fourth quarter. U.S. stocks rose on the back of the news, drawing more attention away from gold. Metals-mining shares fell along with gold prices, with the Philadelphia Gold and Silver Index XAU -2.25% down 2.3%. However, GDP came in below the 3.3% gain forecast by economists polled by MarketWatch and the quarterly growth came on the heels of a 4.1% growth rate in the third quarter. Weekly jobless claims also climbed to the highest level in six weeks. Still, precious metals increased their losses despite the release of “disappointing U.S. macroeconomic data,” said Razaqzada. Downbeat U.S. economic data often draws investors to the perceived safety of gold. Emerging-market woes Gold prices on Wednesday had climbed on fears of an emerging-market crisis and a sharp decline for equities on Wall Street. “While the escalation or abatement of [emerging markets] concerns in coming weeks is difficult to predict, we recognise that this could present upside risk to gold should the jitters continue,” ANZ Research strategist Victor Thianpiriya said. “Nevertheless, the gold market will be absent one major supportive factor over the next few weeks — China.” He explained that the precious metal is about to lose “a major price support” as China winds down for the Lunar New Year and demand dries up in the coming weeks. The Lunar New Year, which begins on Friday, is an auspicious time to buy gold. With the New Year celebrations starting Friday, “investors there will be away for most part of next week,” said Razaqzada. “It is widely anticipated that jewelry demand may have risen strongly in the world’s second-largest economy ahead of the celebrations.” The latest customs data from Hong Kong showed earlier this week that net imports of gold by China from the former British colony had increased nearly 25% in December compared to the month before. For the whole of 2013, net imports totalled 1,158 metric tons — double the 2012 level, according to Razaqzada. Elsewhere in metals trading Thursday, platinum for April delivery PLJ4 -1.56% fell $21.50, or 1.5%, to $1,386.60 an ounce while March palladium PAH4 -0.29% shed $2.10, or 0.3%, to $709.05 an ounce. High-grade copper for March delivery HGH4 -0.57% shed 2 cents, or 0.6%, to $3.22 a pound.
Posted on: Thu, 30 Jan 2014 15:42:51 +0000
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